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Is Risk All Relative?

August 26, 2013 - Ernest Hohmeyer

We admire those that take great risk, perhaps even a bit jealous. The skydiver descending from space, a quarterback that throws when everyone expects run or the entrepreneur that seeks to develop a multi-million dollar project are all undertaking some level of risk.

Decisions, Decisions

As I was driving my daughter back to her second year in college, I was thinking, you know, we all take on risk – each one of us.

For example, what was I thinking when I let my daughter pick a school 6 hours away? What kind of risk was that?

Further, should I really let her go abroad this year when it was just yesterday I was making the big decision of her crossing the street by herself? Why is this pit in my stomach not getting any better anyways, I should be seasoned by all this now with 2 kids in college. And why is this causing me to think about my own life with this pounding voice screaming “So, now what is YOUR next adventure? What are you going to do with YOUR life? What RISKS are you willing to make?”

It’s Different

I just don’t look at all of this the same anymore. It seemed when I was young, risk meant adventure – it was the moment – it was now. Now risk seems to be equated with consequences – about what it may mean tomorrow or the next day. And that is the thing about risk, it means something different to each one of us. And here is one more thing we may not consider: our perception of risk changes as we change.

Start with the End

I often thought when I teach small business classes, I should start out by identifying how you are planning on ending your business.

That’s right: what is your exit strategy.

Things change and you change. Sometimes we get so lost in the euphoria of starting a venture, we don’t think about how we get out of it if we want to. We are so excited about that first customer, our new digs and being independent, we don’t think about what if we can’t do this work anymore? What if I want to move to be closer to my kids? What if I just want to start something new?

Fixed Image

It is the oxymoron of business that we plan for a certain goal: a retail store that relies on certain products and customers for example. We have this vision in our head of how our business will operate. As we get into business it can evolve into this concrete and immovable image.

Yet business is all about change and adapting to it.

But we change too and sometimes that gets lost.

Perhaps we don’t want to think about it, feeling that it is too selfish to think about us – except without us there would be no business. Or it could be we just don’t know where we are going. But knowing that you will change is the first step to being prepared. Understanding that your perception of risk may also change can be an important consideration in your planning.

No Right or Wrong

And there is no right or wrong here about how your view of risk changes. We beat-up ourselves if we change a lot especially over risk. “I should have done this years ago,” we sometimes lament. Or, “I can’t take this level of risk anymore,” thinking it is defeat.

Give yourself some credit for recognizing that things have changed. Just because you may no longer consider taking that “big” risk does not mean you are defeated. You may have learned by now that a headfirst slide is not the only way to steal a base. A methodical, planned bunt can get you over there as well. Testing out the pitcher’s throws to first base first through customer surveys and gathering marketing intelligence may not be that big sensational play but it can mitigate risk and get you the same result.

What is Risk?

The point is that risk may have been more of an impulse or an immediate reaction when we were young. It may have been more breathtaking and spectacular. But we can change how we look at risk and still be successful. Risk can be thought of in terms of tomorrow and long-term opportunities. We can deal with risk in a different way and potentially be more successful at it through planning.

And we should not think that taking less risk does not mean less success. How many times have we heard of millionaire entrepreneurs starting out of their garage with less than $10,000? Major parts of our national economy are those small businesses that employ 6 people or less.

Big & Small

Sure the million dollar projects grab headlines. However this does mean that self-employed businesses or “micro-enterprises” do not “risk” just as much. We need to remember that their sales are sometimes measured by a couple of thousands of dollars, sometimes only hundreds. And the requirements to borrow can be just as harrowing. There are times with little “business assets” that personal ones can become the major collateral. This can mean that a house or savings fund could be at risk.

All of Us

All of us are out there each day taking a chance – both small and large businesses. Mitigating risk is something we should do no matter what stage of business we are in. Understanding that our perception of risk may change is something we should consider now. Just because a certain amount of risk may have been acceptable at one time but now has changed does not mean you have failed. We also shouldn’t think that risk is only measured by dollar amounts.

In the end, we all face risk. Understanding what it is, how it is changing and just facing it may be some of the real measures of success.

Entrepreneurship is a risky business for all those that undertake it. The one thing we all share is that we are partners in taking a risk on our community.